Saturday, July 30, 2011

I recently blogged about the need for a National Centre for Complexity Economics.

I said the centre should be in an institution with a mathematics department and an IT department able to support it.

Today I became aware of the Australian Centre for Commercial Mathematics, whose "mission is to conduct projects with industry to solve complex problems using advanced mathematics and statistics." It only commenced in January this year so it hasn't taken me too long to discover it.

The School of Economics at UNSW houses both the Economic Design Network (EDN) and the The Society of Heterodox Economists (SHE).

The EDN supports research and scholarship in economic theory and experimental economics, and in its application to the design of economic policy. They claim;

By encouraging interdisciplinary research and policy innovation, using state of the art techniques in economic theory and experimental economics, it will create practical tools that can be used to solve complex social and economic problems.

By linking Australasian researchers into multidisciplinary teams and networks involving some of the best scholars and centres for economic theory and experimental economics around the world, it will also build on our strengths and help us to create a world class economic design capacity in the region.

SHE represents a collaboration of economists outside the mainstream. Annual conferences, workshops, a working paper series and a virtual forum are also coordinated by SHE.

These two together offer the potential for the development of a centre for complexity economics.

I should note that my earlier post didn't adequately deal with my equivalent for economics of the unified field theory in physics. I touched on some of it on my post about John Quiggin's lecture.

The argument proceeds simply;
1. Neo-classical economics is inadequate as science as its assumptions (especially methodological individualism and methodological equilibriation) do not fit most real world circumstances.
2. Behavioural economics and institutional economics are both attempts to understand economic behaviour as systems - in a way, where do the preferences of individuals come from.
3. Evolutionary economics and economic dynamics attempt to deal with the fact that economic systems are, in reality, seldom in an equilibrium state.
4. The fact that the neo-classicists force economic problems to be tractable as constrained optimisation problems doesn't mean the use of mathematics is wrong, it is just the wrong mathematics.
5. If we posit that preferences are formed by experience of previous market transactions and that the question to study is how changes occur not what happens at "equilibrium" then the mathematics to be applied is the mathematics of complexity.

Finally, I draw a distinction between economic science and political economy that builds on John Neville Keynes original distinction between positive economics, normative economics and the art of economics. For me the latter is a separation of the issue into the three fields - economic science which describes how agents react to actions of other agents in economic affairs, ethics which is what our policy goals are (we should promote equity or we should promote efficiency) which are combined to create the kind of political economy practiced by Adam Smith - advocating policy positions.

I fully acknowledge the claim that many political economists would make that "economic science" is almost never practiced as it claims to be. I would however further assert that other aspects that appear in heterodox economics are either specific examples of institutions (more specifically the way that power is exerted to create preferences) or contentions about unstated ethical goals.

Thursday, July 28, 2011

News in the AFR today (behind paywall) that the coalition is about to "change its point of attack" on the NBN from the need for a CBA or the integrity of the NBN Co CEO to the affordability of the service and label it the "No Battler Network".

This is a strange strategy since the analysis of the Internode pricing is that it is the same as their ADSL 2 services! Much focus has been on the fact that the entry level plan is dearer than a telephone line for those who don't just want a telephone.

But let's look as much as we can at the detail and how it is that voice services are delivered and priced. The NBN Co entry level wholesale price is $24 per month including the 150kbps quality 1 for voice. Internode isn't in the business of offering voice only so it hasn't looked at building a voice only service. But Telstra not only will, but has to. It will continue to be the contracted "USO provider". There will be from Telstra a voice only service at EXACTLY THE SAME price points as exist today.

A big difference between the network requirement for voice and Internet is in the backhaul - and the CVC charges Simon Hackett has bleated about. To provide voice you just need that 150kbps per service - not the up to 100Mbps that the internet requires.

I sincerely doubt the NBN Co/Telstra/Government agreement could have reached the point it has without clarity about the retail price for voice to be offered by Telstra.

The inconsistency from Joyce is that he is quoted as supporting a Fibre to the Node (which he calls broadband to the node) build because the price of higher speed services delivered by wireless or satellite will be higher than fibre.

His inconsistency is manifold. Firstly because in the period between his election to the Senate in 2004 and becoming a Senator he and Senator Nash delivered a report for the Page Centre calling for a fibre to the home network in regional Australia. Inconsistent because from 2007 to 2010 coalition response to the NBN was to say the network was unnecessary and that regional problems would have been solved by the OPEL contract - that is wireless.

Finally no one's FttN proposal results in a bigger physical footprint than the FttP proposal - the premises outside fibre reach are basically outside FttN reach. If not then there may be a small tweak possible at the margins.

The coalition strategy is ill-founded and should fail. That is so long as the ALP can focus its mind on facts not rhetoric.

This is a very, very serious wake-up call for the National Broadband Network and for the Government. In establishing a national network of this kind, there is a greater risk of security breaches being able to pervade the whole network. What we're hearing today from the AFP is that this man has effectively been able to map much, if not most of the NBN's existing infrastructure. Now if that were done when the NBN were fully built, that would be a really a very serious security issue - national security issue.

That ABC report also made it clear that NBN Co systems had not been compromised - the "entire system" that the hacker had accessed was that of the service provider to the NBN, not of the NBN.

The real issue here is the myth that the NBN represents a "network centralisation". The NBN Co’s percentage control of all Australian communications infrastructure once built will be LESS THAN what Telstra has now (it replaces the Telstra acess network only – Telstra’s backbone and mobile networks stay with it).

Senator Conroy has announced the membership of the new Regional Telecommunications Independent Review Committee.

The committee is due to report in March 2012.

The committee has legislated terms of reference to report on the adequacy of services of significance in regional areas. They have been also tasked to report on "initiatives that will enable regional communities to participate in, and realise the opportunities of, the digital economy".

Quite disappointingly the ever eager Department has refreshed the RTIRC website - listing the new committee and scrubbing it of the last report and the government response to it. One would think that the RTIRC site could have its own archive for each of the previous reviews containing any discussion papers submissions and transcripts together with the reports and government responses.

Hopefully this will be rectified. In the meantime I have created a repository of the reports and Government responses on the DigEcon Research website.

Today we are taking another step in our transformation journey. In a highly competitive industry it’s important we are efficient and streamlined. Over the past few months we have reviewed our structure, our capability, our systems and processes, and our cost base. As a result of our review we have made some hard decisions -- to consolidate roles, reduce headcount and reduce operating expenditure. Today we are announcing the removal of 250 roles from across all areas of the business. This will result in around 180 people leaving the company.

We have spoken today with each of the affected individuals to discuss their situation and any alternative employment opportunities. Redundancies will not be voluntary -- they will result from areas where we can flatten our management structure, reduce duplication or streamline the business. To ensure the best personal outcome for those people impacted we have engaged an external provider for counselling and career services.

We have a comprehensive strategy to take us into the future, and we have already delivered a number of major initiatives to prepare us, including the establishment of ODM and release of the first product set including TV Now and Smart Safe. These changes are part of our ongoing transformation to continue our focus on customer experience and support our evolution as a digital services provider. We will communicate more over the coming months on our strategy to enable us to compete in a rapidly changing market and manage growth for the digital future.

Please take time to talk to your manager or HR representative if you have any concerns or questions.

POS

This has all the classic hall-marks - most notably an attempt to sound concerned for people while never really mentioning their contribution. The Watson examples were all about writing to "valued customers" about taking something away.

What I find fascinating is how every telco seems to have as its core ethos "transformation" - this is the ter that David Thodey uses and Paul Broad used to at AAPT. But a transformation is a one-off event that has a starting condition and an ending condition. What telcos use it to mean is a never-ending process that is partially reactive to external change and partly driven by the inability to ever consider all the dimensions of the business and respond to the current "crisis".

Telcos lurch on a rhythmic cycle between focusing on market share or revenue growth, margin growth and cost containment. They never seem to be able to have strategies that address the optimisation of more than one key metric at a time.

The good people at Optus though can rest easy. Their CEO has told them "We will communicate more over the coming months on our strategy to enable us to compete in a rapidly changing market and manage growth for the digital future."

Meanwhile I'm informed by people who have had recent Optus experience that their metrics are just as bad as the Government's Digital Economy ones...what I've critiqued as ordinal rather than cardinal goals. Optus still thinks it wants to "beat Telstra" on things like customer service rather than define what it thinks customers want and then delivering it.

We know there is a crisis in mathematics education in Australia. But what is being done about it?

This item from The Conversation suggests we are going to make it worse because teaching and learning professionals want to make a post-degree education qualification two-years.

Meanwhile the ALP went to the last federal election with a program called Teach Next promising to extend its fast-track process being trialled in Victoria to the rest of the country. Other states like NSW have tried to "convert" non-mathematics graduates into maths teachers.

As a mathematics graduate I sometimes wonder whether I shouldn't retrain and go forth and teach. The challenge for me is I really don't know if I could be any good at it. I could teach motivated students - but could I motivate the disinterested?

My sense is that mathematicians considering teaching are more likely to be attracted by the kind of "on-the=job" training that the Gillard government proposed.

A good question for an education reporter right now would be to ask the Feds what they are doing.

Tuesday, July 26, 2011

I was grabbing a couple of volumes off my bookcase this morning. Both were reports by the former Bureau of Transport and Communications Economics. (One was report 64 - the cost of Telecom's Community Services Obligations, the other was report 89 - the communications futures report). What was originally just the bureau of Transport Economics morphed into BTCE with the Hawke Government mega-ministries.

Three things decimated research capability in communications. First was the split between comms and transport. (Transport still has the bureau in BITRE). Secondly the Howard Government centalised research into the Productivity Commission. Thirdly a few other research activities got outsourced (e.g ACMA and ACCC reports on the economic value of competition reforms).

For the record here is a list of BTCE reports on communications I found in the NLA catalogue;

The speaker does come from a social media consultancy, and the ambition of the centre doesn't seem to be much more ambitious than that;

The Digital Hub is an emerging centre which brings together the skills and knowledge of BU academics that have expertise in digital media and innovative technology, providing a one-stop point of contact for research-led enterprise. The spirit of the centre is to work without barriers, in inter-departmental synergy, creating, using, and passing on knowledge for the benefit of all those we work with: students, businesses, our staff, government and many more.

WALES today is host to a wealth of world-class research, much of which is carried out in its top universities.

This research is innovative and relevant, spanning a wide range of disciplines. This includes the Welsh Government’s priority areas of the digital economy, low-carbon economy, health and biosciences; and advanced engineering and manufacturing.

The Welsh have appointed a Professor of Digital economy. A brief look however suggests the appointees expertise is in globalisation and the global dimensions of the Digital Economy.

This opens up an interesting question in political economy - whether the locus of study is growth (how to have more) or distribution (who has what), or if both how are they balanced. The late twentieth century obsession with "efficiency" masks the fact that this sounds like it is about growth, is really about distribution and is ultimately about distribution in an anti-equity manner (the "reference" of the person with the most money is more important than the preference of the poor).

I've not heard the idea of authors being charged high fees, but certainly readers are. I'm going to assume the reality is about the cost to access not the cost to be published.

Most interesting observation is the extent to which journal publishing has become centralised among a small number of publishing houses. Interestingly the electronic distribution model feeds this development. It is easy for a library to subscribe to journals that arrive in the mail and get shelved. It is far harder to implement the systems interconnection processes and associated financial models to allow electronic publishing.

The threat to the publishing houses comes from the fact that freed of any print need, an e-journal can become totally public access. However, they are still not free to produce - to be reputable they need editing and funding.

The article credits Joseph Stiglitz as identifying knowledge as a public good. What is missed in this is the role knowledge plays ion the "new growth theory". That is, that economic growth all comes from the spill-overs of R&D not its private capture.

A useful strategy for the Australian Government might just be to start funding on-line only, open access journals in a number of disciplines. Existing high profile Australian Journals could benefit from a new economic model. After all, what makes an article "sing" is the amount it is cited. To be cited it needs to be accessible.

I'm getting to be a little bit stunned about the ongoing reaction to the NotW story.

We have confessions of a person who pitches the issue of working for the Murdoch's as a kind of addiction. You get addicted to the excitement and ethos and forget about the values.

But elsewhere you have politicians claiming that News International execs tried to blackmail them with statements like "According to one account from a senior party figure, a cabinet minister was told that, if the government did not do as NI wanted, the Lib Dems would be "done over" by the Murdoch papers."

If only those politicians had thought to go the Hugh Grant route and record these conversations.

The episode does bring to mind the words attributed to Edmund Burke (though disputed) that "All that is necessary for the triumph of evil is that good men do nothing."

Took a really enjoyable circular weekende trip - Canberra to Batemans Bay to Sydney. Took us through Braidwood on Saturday morning - market day.

I bit my tongue when two old blokes (that means about my age) were agreeing with each other about how the Gillard government is destroying us, what with climate change and illegal immigrants. One said to the other "I have no problem with taking refugees from the camps - they just have to come in through the front door".

It made me think of a new map of the world published by The Guardian to show the new country of South Sudan.

Bottom right shows source and destination of the world's refugees. 3 million Afghan, 1.7 million Iraqi refugees. Pakistan has received 1.9 M, Iran 1 M and Syria 1 M. Do the rednecks who talk of front and back doors understand that there is no such thing as the "front door" for a refugee? This is not orderly migration - these are people uprooting themselves and fleeing.

Where it becomes most depressing is when the refugee question and climate change are discussed by the same people. See we don't want climate change policies that "export jobs" or require us to reduce emissions if developing countries don't have to.

if you want to stop the global movement of people looking for a better life, you at least need to make their life better where they are.

We've discovered that invasions to plant democracy don't work. We also know that the IMF/World Bank economic prescriptions don't work. But what does?

I'm really keen to hear some conversations on that.
Note. Thanks to Jessica Irvine for tweeting about the spreadsheet porn of The Guardian which is how I found the map.

The speech to the ALP NSW Conference by Dr James Macken on receipt of his life membership was highlighted to me by a delegate as "the best speech of the conference".

It is a ripper and for ease I've transcribed it below (also embedded the video below).

Mr Chairman and delegates, if you think because of my voice that I'm trying to copy Neville Wran you're wrong, he's copying me.

It's a great honour to become a life member of the Labor Party, and on behalf of my fellow life members and myself I want to thank the delegates very much.

There are big disadvantages of being a life member. One of them is that you are very old to start with. But the big advantage of being very old is that you have a long memory. And in the Labor Movement I've found that a long memory is indispensable to political survival.

My memory, my first campaign, was the Chifley campaign on bank nationalisation in 1949; a very bitter campaign.

Now I know it is politically incorrect to say this, but I only get one chance to stand on this platform and it is today. I still believe in bank nationalisation.

Apart from the public control of credit, which was always at the core of Labor, the other thing we had to do in the $0s and 50S, we had to sign a solemn pledge which we meant to support the socialisation of the means of production, distribution and exchange. Well I still believe in that too.

Well, policies change, but the essential focus of the party doesn't change. The Greens are the party of trees. The Libs are the party of big business corporations and big institutions and foreign governments.

But we are the party of the people. We're a humanist party. We are the party of the poor, the marginalised, the refugees, the unemployed, the workers, all of the poor people who've got no one else to represent them. Essentially a party of the people, a true humanist party, and the only one in Australia.

When we turn our back on the people and start becoming a party of developers, a party of big business and institutions, we get the train wreck we suffered at the last State election.

Well comrades, from this weekend on it's all up. New reforms are in place, tentative steps - but steps none the less - and we can look forward to the future now as the party of the people with some confidence.

I want to thank you delegates for the great honour bestowed on me today. I particularly want to thank the Trade Union delegates that are here today, because as a unionist they are my home and always will be my home. My first union ticket is dated the 26th of January 1947, that was the date of the first pay I got after leaving school, and I've been union ever since.

In the Trade Union movement as you know we have some bloodthirsty fights. They are good clean fun but they're pretty bloodthirsty fights. But nonetheless when the pressure goes on, when the employers attack, when the living standards of the workers are under seige, there are no divisions, there are no factions, there is only a united front of the workers against those oppressors.

Comrades, don't ever forget the unity of Labor is the hope of the world, and there are no factions on picket lines.

Thank you all very much.

The sentiment about the pledge is fine - but it is worth remembering that the socialisation objective is still there. I've written before that the challenge for the party is to give meaning to that objective.

Macken's comments on bank nationalisation provide an example. If the goal is "government control of the provision of credit" that can be achieved by the regulation of private sector banks rather than government ownership of the one-and-only bank. It can be argued that one of the bases for Australia's ability to weather the GFC was our greater relative regulation of credit provision. Most notably the NINJA loans (no income no job no assets) that were a feature of the US crisis are illegal in Australia.

I have no quibble with unions, I just still quibble with their control of the party. They do not represent the people as eloquently defined by Macken, but at best they represent people currently employed and at worst represent their sectional interest over others. Was the campaign against Iemma and Costa really a worker campaign or was it an ETU campaign? There are unions opposed to regulating gambling despite the victims of gambling being other workers. Let alone the position of control in some unions like the shoppies.

The future of the ALP is not assured by some tiny tinkering with its structure and processes. It needs to embrace its objective and explain it.

It is an interesting observation that both of the last two leaders of the Liberal Party have been considered possible ALP recruits in the past.

Tony Abbott was certainly wooed in his student days by great NSW right winger Johnno Johnson. The fit would have appeared natural because Abbott's primary opponents in student politics of the 70s were real communists of various varieties. As such he was a natural ally of the former groupers who retained control of the ALP. (See note below).

The fact that he ended up in the Liberal party can be partly credited to the influence of the future Tanya Costello, though not by the mechanism that Bob Ellis claimed in Goodbye Jerusalem - the "seduction" was entirely of an intellectual kind.

Malcolm Turnbull was also touted as a potential waverer, especially through his closeness to Paul Keating and his support of the Republic. In his case the presence of his father-in-law would have been a steady influence on his choice of the Liberal clan. But the facts remain that at every turn Malcolm has had to impose himself on the party, they have neber embraced him. This perhaps reflects the deeply anti-intellectual traditions of Australia's conservatives.

It is not unusual for individuals to be intent on politics but unsure of which path to pursue. It was always an accusation made by my parents (who knew the Whitlams at University) that Gough only went to the ALP after being unable to gain traction on the conservative side. While history records the progression otherwise, it is notable that Whitlam's commitment to the ALP was about modernising the constitution not any philosophical cause.

By the same token ALP history is replete with "rats" who broke with the ALP to side with their opponents - the most notable being Billy Hughes and Joseph Lyons.

None of this should be surprising given the way "public choice theory" argues that democratic politicians are really competing for the same median voters.

Today we see the suggestion that Turnbull is a threat to both Abbott and Gillard - posing the question of what support Turnbull would have as Labor leader. Given the fact the ALP has been attacked from the left by the Greens the party is increasingly a party of the social democratic middle. The Liberals are still highly fragmented, but Abbott is certainly a poster child for "do nothing" conservatism - a position which the more rabid right can accept.

The Gillard coalition looks fragile given the ongoing demands from Andrew Wilkie that Gillard has to use all her political capital to ensure the pokies legislation gets through.

It does raise the interesting question - what would Turnbull do if a deputation from the ALP factions - possibly including the PM herself - were to say "Malcolm, the most important policy challenge before us is getting to progress on climate change. You know and we know that if the Government stumbles, then Mr Abbott will become Prime Minister and climate change and all other good works are at an end. We invite you to change sides and to be Prime Minister ...."

Note: The SRC of which Tony Abbott was President (directly elected) had 21 members (by recollection) that were made up of seven members of the broad left, seven members from Abbott's conservative ranks and seven members of a much less co-ordinated middle. Members of that middle identified variously with the ALP, but included a zionist group that was motivated by opposition to the pro-Palastinian stance of the left.

I was elected Vice-President, Paul Brereton (now a Justice of the Supreme Court of NSW) was elected Honorary Secretary/Treasurer, Tanya Costello (nee Coleman) was elected as Education Officer. I would need to do more research to do justice to the full list.

Many thanks to Ry crozier, Annabel Crabb and Jonathan Holmes for the tweets and retweets that brought this piece to my attention.

Just in case someone at News Limited cares and fixes it I will quote here to immortalise what would sound good as parody coming from Roy and HG, but looks mightily out of place in the Oz.

CADEL Evans has produced the ride of his life to become the winner-elect of The Tour de France.

Evans grew wings as he ripped his way through the streets of Grenoble to rip the yellow jersey off the back of Andy Schleck to ride his way into the history books as the first Australian to win the Tour.In an individual test of man and machine, Evans not only ground out a fabulous win, as he not only ate into the 57 seconds Andy Schleck enjoyed at the start of the day, he absolutely slaughtered the opposition for overall champion to record a time of 55min 40sec.

In a superb ride against the clock, the 34-year-old BMC rider destroyed Andy Schleck, who finished just three seconds ahead of older brother Frank, in a time of 58mins 11sec.

Evans will lead the survivors onto the Champs Elysees today by a whopping 1min 34 sec ahead of the field.

Just count them - "grew wings" and two uses of the verb "rip" in thesecond sentence. The slightly excessive "slaughtered" and two "not only"'s in the third sentence.

Thursday, July 21, 2011

I'd dearly love to comment on Malcolm Turnbull's new broadband policy as announced to CEDA yesterday. Unfortunately I wasn't there. But more surprisingly the very media astute Turnbull doesn't seem to have published the speech yet.

Various parts of the tech media have covered it. ZDnet reported it as a faster scaled back NBN. Rob Burgess of Business Spectator reckons that Turnbull pulled two of the three planks supporting the NBN away.

From what I can figure out Turnbull is now saying that it is important to have a plan to improve broadband services in Australia. That's a big change since through most of the Senate NBN Committee hearings the coalition stance was we don't need a faster network and all its for is entertainment.

Turnbull's plan is also supposedly based on the idea that Telstra should continue to face structural separation. He doesn't tell us, however, how that will be achieved - or would have been achieved without the NBN. It is also a big change from coalition opposition to the structural separation bill that they labelled "a gun to Telstra's head".

His next big step is apparently to ask the Productivity Commission to do a "cost-benefit analysis" to choose the best technology mix and include FTTN. I'm still prepared to stake my hat on that analysis coming to the same conclusion - if done properly - as the Government's Expert Panel. That is, that FTTN is at best an intermediate step, and the extra upfront investment isn't worth it in the long run. But the plan may have more credibility if he were to hire people who do CBA for a living - like business people - not people who spend their lives telling other people to do CBAs - that is the PC.

By the way, I wonder if Patricia Scott, former Secretary of the department and Chair of the Expert Panel but now Commissioner at the PC would get to run the inquiry.

There is no evidence that Telstra would have any interest in renegotiating its agreement to pursue a structurally separated FTTN build. If the Government under the coalition were to say no FTTH NBN then Telstra would revert to their NBN Mark 1 position - no access to our copper in a structurally separated model.

The bit I want to see more of is the notion of a "voucher" system for regional services. It sounds like crazy classic neo-liberal orthodoxy - like vouchers for schools etc. There are scale economies in this stuff. the vouchers are useless unless everybody spends their voucher on the same supplier...that is why we have Government as a way to co-ordinate action.

Turnbull's plan is not "credible" because, as far as i Can figure out, it really is exactly the same as the coalition non-plan from 2005 to 2007. It just looks credible because Malcolm comes across better than Tony Smith or Bruce Bilson ever did.

The bane of the senior business executive is without doubt always the marketing department. They are invariably composed of people with business degrees who consistently fail to remember anything they were taught in economics.

They also are masters of the art of briefing out all intellectual work to agencies, brand consultants, researchers, R consultants and all the other people famous for being on that first space ship in Hitch-Hiker's Guide to the Galaxy (together with the hairdressers and telephone sanitisers).

I was reminded of this by an article that follows the observation that inbound tourist numbers from the US have declined since the Oprah campaign.

I haven't read the stats, and I'm sure they are not an econometric model that tries to separately measure the effects of advertising and promotion and price effects. With the rising Australian dollar we should expect inbound US tourist numbers to decline - but have they declined by less or more as a consequence of the Oprah effect?

The article though says;

I can almost see a boardroom of marketing geniuses when a light bulb appears above someone’s head and then like some idiot savant they start talking about warm weather, coral reefs, Ayers Rock and of course - the final brick walling us in to this national identity tomb - a koala.

And therein lies the rub - why do we equate "marketing" with "advertising and promotion"? Ever heard of the five Ps of the marketing mix (of which - surprise - price is one)?

But even when we think of just the promotion "p", there are a number different levels at which a campaign can be pitched.

Convince a person they should take a holiday in the first place.

Shape the person's preference for what kind of holiday they want to go on.

Demonstrate to the person that Australia offers the kind of holiday they want.

Research driven promotion efforts will almost always result in advertising campaigns designed for option 3.

My points are that true "marketing" of Australia for tourism is as much about product and price as it is promotion; and that the promotion needs to reach beyond simply attempting to appeal to customer's ptre-conceived notions of the holiday they want.

Havyatt's Definition of Marketing: The activities of a firm designed to ensure that the economists assumptions of a free-market do not apply.

While I think I held up well in the BNet debate I really did nowhere near as well as this piece in - of all places - today's The Punch (that is a News Limited title).

It outlines the deception of the Monckton/Plimer/Carter line - which goes;

That the world is not warming, even if it was warming it’s not human activity driving it, and even if human activity is driving global warming, doing nothing at all about it is the best solution.

It explains neatly the rhetoric style that blends "fact and fiction in such a way that, to the uninformed listener, what they say can seem both reasonable and reassuring" and "unconstrained by the need to actually tell the truth, and with a gift for cherrypicking facts that support their world-view (especially when taken out of context) they rattle off non-sequiturs and utter nonsense to support their main argument."

More importantly it explains the long history of the theory, that there has been no evidence mounted against it, and why the country with the highest per capita emissions on the planet should act.

Read it. Get others to read it. Blog about it. Link it on Facebook and Twitter.

I did not watch all of the Murdochs' appearance before the UK Parliamentary committee overnight. From what I did see I reach the following conclusions.

1. If the scenario painted by Rupert and James that the UK issues were all at the delegation level of the CEO in the UK then Rupert should have declined to appear.

2. Rupert clearly revealed that there is no effective managerial risk management process. There are things that occurred that were not notified to News Corp's senior executives that should have been.

3. Rupert Murdoch is now old - you could not reach a conclusion from watching his performance that he should be the CEO and Chairman of a major listed company.

4. News Limited's approach to the ethical questions has been to deal with them exclusively as legal questions, hence the excessive reliance on investigations by police rather than their own investigations.

From my purchase point the travesty would be if James takes a fall and Rupert survives. The problem of culture and governance that befell the company and resulted in its need to close NotW starts and ends with Rupert.

Tuesday, July 19, 2011

An interesting experience this week. A couple of blog posts - in particular on reform - resulted in an invitation to debate a carbon tax opponent with the view to a discussion on whether change is possible.

The debate unfortunately stayed on climate change. I had a bit of fun - especially at the start when my opponent said he'd "studied natural science for 2 years" at Cambridge and then told us how many Nobel prizes they earned.

It was fun.

It was, however, a real pity that we didn't spend more time on the basis of debate. I also think I scored a win on the myth of John Howard and the GST. The public voted strategically for a Senate that would vote against the GST - the beginning of the end for the Australian Democrats was Meg Lees GST deal and ratting on her voters.

I was actually hoping, given the interviewer, to use the conservative reaction to the NBN as another example. They same strategy has been used against the NBN....a whole string of different and inconsistent alternatives.

I love the line "the most chilling thing was an Indian telling me that bringing this in would make us the white trash of Asia". No evidence as to whether this was a credible analyst, just a "dispassionate observer".

This reflects again the very different policy dynamic in Europe where a wide range of issues is gaining attention. Australia's only great initiative remains IBES which continues to have a very academic bias, and I would suggest a technology rather than social orientation. We have no Digital Economy related NGO outside the University space.

The kind of things that can occur in a massively connected world include this initiative to bring together both the open data concepts and cloud computing (genuine computing not storage) to better model climate associated risk. This is a nice move away from the increasing tendency to "commercialise" research. I like the idea of a "Head of Innovation and Entrepreneurship and Director of the Digital Economy Lab", and indeed a "Digital Economy Collaborative R&D progreamme" which is not the same as the Australkian megastructures called CRCs.

Meanwhile I've ranted recently in public about Australia's lack of participation in global standards setting, and our ability to practice middle-power diplomacy. So I'd be interested to hear of anyone who knows what Australia's representation at the ITU Global Symposium for Regulators and Industry which is apparently addressing "Smart Regulation for a Broadband World".

I'm currently slaving away trying to write a piece on the importance of complexity economics to public policy. This builds on all the critiques of the neo-classical orthodoxy which I enjoy.

Against the orthodoxy there is arrayed a group that refers to itself as either heterodox economics or political economy. This includes a large strand that rejects the use of mathematics in economics and also make a cry for plurality.

My piece focuses on an alternative view that behavioural, institutional and evolutionary economics all form facets of complexity economics, which has fundamentally different underlying axioms than the neo-classical model, but is nonetheless able to be constructed in mathematical form.

I do so because just as the neo-classical revolution in economics was spurred by the corresponding changes in economic activity (the latter, or sometimes second, industrial revolution) so the issues of the digital economy require a response in economic theory.

As I do so I despair at how little either the intellectual context of economics is taught in Australian Universities, and how little of the more recent behavioural theories occur.

Then I receive by e-mail the results of the policy opinion survey conducted by the Economic Society of Australia. The responses were few (just under 500) but nearly two-thirds were employed as economists, over 80% had Honours degrees or more, and they were fairly evenly divided between private sector, public sector and university employment.

In response to two questions on whether Australian undergraduate economics degrees should include more on both behavioural economics and the context of economics a majority agreed with the proposition.

The people surveyed as either the providers of the courses or the employers of the output should surely be doing more than just responding to the survey.

A challenger in Australia right now would be finding enough staff qualified to conduct the courses.

My view is that we need a National Centre for Complexity Economics housed in an institution with both a mathematics and an IT faculty interested in assisting with the research and training in the centre.Novae Meridianae Demetae Dexter delenda est

I had a great Sunday. Firstly enjoyed a Rugby ecumenical service in Kathy Freeman park with the Samoan choir and Nick Farr-Jones giving the address.

I then got to watch a cracker game of Rugby and can always say I was there when Samoa beat the Wallabies!

A few observations. None of the Brumbies in the run on side showed any improvement on their Super Rugby form. Matt Giteau has prematurely aged - he couldn't step around a dog turd on the pavement these days. Samoa showed the Wallabies will be as susceptible as the Reds were to big commitment at the breakdown.

This wasn't the strongest Wallaby squad by any stretch of the imagination, it wasn't as strong a fifteen as the Reds or even the Waratahs bits and pieces outfit. But it was still stronger than the other three Australian franchises individually.

The result showed the effects of hubris and, more importantly, the lack of leadership on the field. When things started going wrong nothing happened.

The Reds in Horwill and Genia had two leaders of quality. The difference in the 'Tahs between games with and without Phil Waugh as leader were remarkable. The Brumbies and Rebels lacked on field leadership all season.

Memo Robbie Deans. Play Rocky Elsom if you want - though I'd put Scott Higginbotham on the flank and Wycliffe Palu at No 8. But don't make Elsom captain.

******

It was interesting to watch the Wallabies in the context of the Farr-Jones address. He'd said that the development in the Wallabies from 1989 to 1991 was to focus on process not the scoreboard. Focus on what you are doing and trust in the fourteen men around you and the scoreboard will follow. The epiphany of that philosophy was the remarkable 1991 win against Ireland at Lansdowne Rd.

He used that as an analogy for life - do what you can do and have faith (in those around you and/or your god). This isn't the same as some latter day Christian sermons - just believe and everything will be alright. You have to do what you can, but you also need to have a practical view of the limits of your own ability.

The contrast was most evident between the way the Reds played this year - process- and the Wallabies on Saturday - focused on the scoreboard.

Friday, July 15, 2011

BOF is conducting an inquiry into recall elections, the idea of which is that a sufficiently high demand - as measured by a petition - requires a government to call an election.

In NSW part of the motivation for this was the perceived problem of how long it took to get rid of the post-Iemms Labor Government. One could suggest that a reversion to three year terms might be a better start.

But it reminds one of the distinction between direct and representational democracy. Whether people understand it or not, the latter is what we have. You are meant to choose people you trust to represent you, who when faced with the need for change because of change facts, are likely to decide the same way you would.

Because this can't be perfect and because voters change and politicians change we have regular new elections.

That's why Julia Gillard has introduced a carbon tax not an ETS, despite the latter being her preference and position before the election. The position was not the one that garnered a majority.

Tony Abbott has been calling for a plebiscite or an election on the carbon tax. But that isn't how it works. We don't allow one parliament to bind another for exactly these circumstances - governments govern if they get the support of the parliament and we re-judge them at the next election.

He now is reported as saying that a vote for Abbott to repeal the tax will be a guarantee of two elections because he'll call a double dissolution if he has to to repeal it.

This gives the PM the opportunity to now lay out the position.

If Mr Abbott agrees to stop calling for an election now and recognises the way the parliamentary system works she will introduce the tax and, if passed, implement it from July 1. She will then be happy to campaign on the carbon tax once people have seen its effect. Further she will commit the ALP to supporting the coalition in a repeal of the tax if she loses the election. But all she asks is that people be given the chance to assess the tax on its real effects not the scare campaign.

Thursday, July 14, 2011

Just so we are all clear - News Corp is the parent company, originally of Adelaide now of Delaware. News International is the UK operation. News Limited is the Australian operation.

The company name comes from the Adelaide News. Rupert's father was a journalist, editor then manager. He died with shares in some companies, not control of any. The executors sold the share of Herald and weekly Times allowing Rupert, his mother and siblings to retain the Adelaide News and a Queensland title (can't recall if it was the Courier-Mail).

Rupert sold the Adelaide News when he later acquired the HWT group - competition concerns wouldn't allow him to acquire the HWT title the Advertiser otherwise.

The purpose of this tale is to remind you of the structure of News Corp, and that Murdoch will happily adjust that structure to suit his needs.

An underlying question is what his commitment is to printed media, in particular newspapers. The recent acquisition of The Wall Street Journal clearly indicates Murdoch hasn't given up on print. Despite the public perception that Governments these days are made by television or even social media, Murdoch knows that enduring contributions stem from the daily drip of print that gets recycled in the electronic media.

That changes only when the contagion effect of rapid news transmission takes hold - the mob effect that I earlier referred to in the closure of News of the World.

The biggest issue with News Corp remains the ability of the 80 year old Murdoch to maintain control, and to create a family succession. The group faces periodic shareholder actions and the latest turmoil adds to those.

Some have speculated that Murdoch will go a step further and abandon the entire UK business. The challenge is that the shareholding base probably sees a change of executives not a change of structure as the solution.

This creates the possibility of the unthinkable - is the only way to save News Corp and the possibility of a family succession for Rupert to go now. If he accepts the blame for the culture and every other error there is no one left to pursue.

James and Elisabeth are both tarnished by the News International story (and the purchase of Shine). Lachlan is currently a relative clean skin - having effectively rejected the culture of his father.

Finally there is ample evidence that what goes on in News is cultural - by which one means unstated by widely accepted norms of behaviour. News Limited has been playing the game pretty solidly over its support of the Sky News bid for Australia Network - even though the ownership is through News International.

Today the Oz has run a story as a kind of "counter corruption" story suggesting inappropriate behaviour by ABC execs in support of the ABC bid. Ultimately the prohibition on lobbying during tendering is an obligation on those being lobbied not the lobbyists. I would be dearly interested in knowing if anyone from News or Seven or lobbyists acting on their behalf has said anything to any Minister about the tender. The difficulty is getting anyone to admit to it - on either side.

Wednesday, July 13, 2011

I have elsewhere addressed commentary that focuses on the idea of need for reform as if it were an end in itself, and in particular the idea that the reform needed was more "microeconomic" reform.

In an earlier piece I labelled the NBN and addressing climate change as great Gillard reforms.

Today Shaun Carney writing for the Fairfax press declares a wider death of the "reform era" and hence the struggle that Gillard will face. In doing so he notes the incredible shift in support over the last four years on the proposition of a price on carbon.

Today I want to suggest we need some clarity of language to discuss the issue, and then see how various campaigners operate in this space.

The first language to define are the three policy stances of "reactionary", "conservative" and "progressive". These are all stances in the way policy should respond to change, and hence how policy should respond.

A reactionary believes that the new changes and problems we face are due to errors in our earlier responses and hence seeks a return to an earlier policy. Work Choices can be fairly described as reactionary - based as it was on the H R Nicholls society and its fixation on the Harvester judgement.

A conservative believes that the new changes and problems we face are possibly transitory, certainly not as great a threat as imagined and that things will sort themselves out. A neo-liberal faith in markets can be seen as a mark of a conservative, they might acknowledge a crisis but that it is better to let the market work through the problem than to intervene.

A progressive believes that the new changes and problems we face require new solutions and that good public policy is made by rapid and targeted response. The words attributed to Keynes "When the facts change, I change my mind" typify this approach. The embrace of competition policy and free trade in the 1980s was progressive not reactionary, as the kind of market envisioned had not existed before.

These three terms actually define different concepts than the concepts of Right and Left. These terms more correctly refer to the policy position taken on the issue of equity. The Left are typically the champions of "social justice", a desire for which leads to calls for greater intervention by the state in the organisation of economic affairs.

Given that the starting point for modern western political philosophy was first a feudal system and then an imperial system, the political Right has historically been made up of reactionaries and conservatives, while the Left in advocating change is progressive.

The importance of the distinction can perhaps be seen in the politics of climate change. The move to put a price on carbon is politically right not left biased - because the "efficiency of markets" is antithetical to equity. It is however progressive.

The response of many environmentalists is a call for less energy consumption - a simpler life, embracing permaculture, home veggie patches and local markets. This looks largely a policy of the Left in that it focuses on equity, but it is also reactionary - it harks back to "simpler times".

The third kind of response is the conservative response. That can range from Nick Minchin's view that there is no problem (it is all a Left conspiracy) or that action by us alone is insufficient (a kind of Left argument that action by us is inequitable).

Where politics gets interesting is how the three strands of reaction, conservatism and progress interact. The development of democracy in the UK offers many great examples of how strange coalitions formed between the three groups - which often coincided with the interests of aristocracy, the middle class and the workers.

The significance now of this analysis is the claim of Carney that we face a new conservatism. It is my contention that what we are seeing is the use of a well-worn playbook from the conservatives on this issue.

The best prior example to look at was simply the republic debate. In the early phases of the push for a republic the conservatives demanded the progressives be specific about their model before they were prepared to debate it. Once a model was chosen the conservatives successfully attacked the model because it was conservative - the attack on "the politician's republic" ignored the fact that it modelled the reality of how Governor-Generals are already chosen.

In the climate change debate the conservative response really did wait for the firm proposals to emerge before reacting. In the process they allowed those wanting change free range to express their different stances. Those stances range all the way from the most market oriented (emissions trading) through carbon tax through various levels of non-market "direct action" proposals. A strand of the Left favours direct action. The Greens actually sank the Rudd ETS because they don't trust the market mechanism. This week we still saw a respected competition commentator adopting the Left anti-market view.

While allowing the progressives to diverge, the conservatives have taken up the cudgels to question the need for action. First there are the attacks on the principle that there is climate change, or if there is that it is man made.

These attacks do highlight an error of the hubris of the scientists - a detailed debate about actual warming is the wrong debate. The discussion needs to be that if the theory is right, by the time temperature changes become significant enough to be conclusive proof the opportunity for all action will be over. That is that conservatism as a philosophy needs to be attacked, we simply can't risk waiting to see.

Carter does try to attack the underlying theory, but as Sou notes this is where he fails. But there are still too few people making defences like this one rather than simple abuse.

As a last crazy act the conservatives are embracing the Left policy of direct action - but only for the reason identified by Malcolm Turnbull. Direct action is the easiest policy to unpick, it is progress that permits future reaction.

The Australian public has not become more conservative, it is just that they understand more about convincing the public and playing to their base fears. Declaring loudly that "the science proves it" doesn't cut it in a world where many don't "believe in evolution", where the health risk of mobile phones is assessed using the logic "I have cancer, I used a mobile phone, therefore my phone caused my cancer".

The progressives need to repeat the fact that by the time the evidence on climate change becomes irrefutably conclusive it will be too late.

When the standard of scientific debate is to assert that because CO2 is a colourless odourless gas it cannot be poisonous you need to use more than just science to win.

Finally, the ALP finds this a particular challenge since it hasn't tried to market a philosophical stance for about thirty years!

Tuesday, July 12, 2011

Firstly from The Conversation one for the maths nerds. A simple description of the P vs NP problem which hinges on the question of difficulty...and is worth a read if you want to understand something of the limits of mathematics.

I could add at this point the fact that this problem is one that could be used by heterodox economists against mathematics - that once you make the economic model sufficiently detailed to be useful it becomes a "difficult" problem and it is easier to simply check the answers provided through verbal reasoning.

Alan Knight writing for the National Times echoes my conclusion that Sky News can't be allowed anywhere near the Australian Network.

Hawker Brittan's Justin di Lollo raises an important question about the regulation of lobbyists. Lobbyists are defined in regulation to exclude in-house lobbyists, other professions that might meet with government officials and representatives of industry associations.

The problem is that it is really hard to define who in a firm is actually a lobbyist, since we will send all kinds of managers into meetings with government.

Personally I think the law change in NSW proposed by Barry O'Farrell to exclude lobbyists as a class from appointment to Boards etc is the error. But on the more general question of transparency of lobbying activity the simplest thing would be to simply make the appointment schedules of Ministers, their staff and senior officials public. This could be limited to appointments and calls initiated by the external party so as not to hinder Government's ability to be informed.

The perhaps wackiest of the lot today is Tony Abbott's claim that the carbon tax won't pass the Parliament as ALP members will rat.

Ratting like that is permanent - not one off. These would be people casting their lot to bring down an ALP Government in the hope of retaining their seat. History has shown the electorate can be very unforgiving of the rat. So far the ALP has been solid in denying the story.

But as a problem the issue facing all MPs right now has a touch of the "P vs NP" problem. How difficult is it to respond to climate change in a way that is effective and can bring the public along? Gillard and co have taken the neo-classical approach of using the price mechanism, Abbott wants direct action...the centralist/statist approach.

Monday, July 11, 2011

Since Senator Conroy launched the DE strategy there has been little public comment. This piece by Spandas Lui I think covers some of the main points though;

1. The goals aren't really clear - in particular why is being in the top 5 on take-up important.
2. The plan doesn't address how the country transitions to a Digital Economy, it is all vision and no plan.
3. The word "productivity" has different meanings to different people.

Let's be clear, Sky News in Australia is a JV that not only includes News Ltd (through BShyB) but also Kerry Stokes' Seven Network and the Nine Network. So in the consideration of the Australian Network TV tender Stephen Conroy has to deal with not one but three powerful media interests - two still being "mogul" controlled.

I'm not one of those who immediately see Conroy's interest as being supporting the ABC's bid. Successive Communications Ministers have often sided with the political imperative of satisfying the moguls before supporting the public broadcaster.

But how, one asks, could the Government seriously contemplate awarding a contract for the flagship of soft-diplomacy, our broadcast of "Australian values" to the region and beyond be tainted by the involvement of an empire that is now in such disgrace.

Let's be clear this is a Murdoch issue, not a News of the World one. as the referred article notes;

The hacking scandal currently shaking Rupert Murdoch’s empire will surprise only those who have willfully blinded themselves to that empire’s pernicious influence on journalism in the English-speaking world. Too many of us have winked in amusement at the salaciousness without considering the larger corruption of journalism and politics promulgated by Murdoch Culture on both sides of the Atlantic. ...
Private detectives and phone hackers do not become the primary sources of a newspaper’s information without the tacit knowledge and approval of the people at the top, all the more so in the case of newspapers owned by Rupert Murdoch, according to those who know him best.

As one of his former top executives—once a close aide—told me, “This scandal and all its implications could not have happened anywhere else. Only in Murdoch’s orbit. The hacking at News of the World was done on an industrial scale. More than anyone, Murdoch invented and established this culture in the newsroom, where you do whatever it takes to get the story, take no prisoners, destroy the competition, and the end will justify the means.”

It is worth noting that the ownership in Sky News is NOT by the local News Limited, but by BSkyB - which in turn is part of News International (only controlled though - Murdoch is currently seeking full ownership).

Quite simply Sky News should no longer be considered on ethical grounds - which seems harsh to Seven and Nine, but unavoidable so long as Murdoch shows no contrition - or even understanding about his moral bankruptcy. Murdoch's attitude is telling as this report notes;

David Cameron was given a personal guarantee by Rupert Murdoch that Andy Coulson was safe to take on as his Downing Street press chief, The Independent on Sunday learnt yesterday, as the fallout from the News of the World phone-hacking scandal threatened to escalate into all-out war between the UK's two most powerful men.

Rupert Murdoch has survived a number of "near death" experiences in the past - all previously near financial crises. This time the stakes are even bigger - it is his own credibility that is at stake. My personal bet is that Rupert Murdoch and James Murdoch will not be senior executives at News Corp by the end of August. Novae Meridianae Demetae Dexter delenda est

Lindsay Tanner. has been in the news over recent weeks peddling his book Sideshow, but today I want to talk about an earlier book.

Tanner made his name by leading a campaign to wrest the Victorian Federated Clerks Union from the Right, and successfully becoming a left-wing State Secretary. He wrote the story under the title The Last Battle.

Reviewing the news from the weekend one sees reportsthat the NSW Labor Conference moved away from a vote in favour of gay-marriage and "It is understood the decision followed indications from delegates with the socially conservative Shop, Distributive and Allied Employees' Association, that they would vote against it."

I don't find this surprising - the Shoppies are renowned for their socially conservative stance - though it should be called what it is a very deeply held Catholic religious position.

What I do find surprising is that this stance endures within the Shoppies. I'm not exactly sure that shop assistants are by nature a very conservative lot. Indeed, a targeted campaign to recruit gay members to the union for the express purpose of breaking its "socially conservative stance" would probably have a high chance of success.

What's more it may be the essential pre-condition for getting the ALP to change its policy stance.

Maybe the campaigners for gay marriage should go get strategy advice from Lindsay Tanner.

The first is this effort to question the credibility of a person whose account Henerdson wants to discredit.

Scrafton was asked by Labor’s Senator John Faulkner whether he had “checked privately and personally” with his dinner companion as to the number of calls which he had with John Howard. Let’s go to the Hansard transcript:

Mr Scrafton: No, I have not checked – for two reasons. One is that the two very expensive bottles of wine we had were both drunk mostly by her, getting angry while I was away from the table talking to the Prime Minister.

Senator Faulkner: This is a real-world note for our committee.

Mr Scrafton: She probably had less recollection than I do of what happened that night.

You can say that again. Mike Scrafton’s evidence was that his calls with John Howard (he claimed originally that there were three but later conceded there two) occurred over a period of no more than 20 minutes.

There are 14 standard drinks in two bottles of wine – including “very expensive” brands. Since, in Scrafton’s own words, his female companion consumed most of the wine – it is reasonable to assume that she downed no fewer than 10 glasses in a 20 minute period. This is at the rate of a glass of wine every two minutes.

The simple error is that the time period of twenty minutes is listed as how long the calls covered, not necessarily how long Scrafton and the saucy tart were together for.

The second howler is when he seems to confuse his comedians called Dave;

You see, Melbourne comedian Dave O’Neil has just had a vasectomy (Go on. – Ed]. Mr Hughes – father of three, age 46 – started off his column by declaring:

I never really wanted to talk about my vasectomy.

But he did. For another 700 words. Readers learnt what the surgeon said to Dave, what Mrs Dave said to Dave, how Dave was present at the birth of his three children and stayed awake on two of those occasions and how Dave had his private parts shaven.

The rest of the piece talks about Dave - so we are never sure which Dave really had the vasectomy - but then again I couldn't see the point of the entry at all, rather than perhaps to suggest men shouldn't be allowed to write about vasectomies.

Gerard, please note, the media is free to write whatever trivial stories it likes. Stick to concerns of accuracy.

Gerard had started his daily spray by pointing out that political commentary that criticises both Labor and Liberal from the left isn't balanced - though he used the much nicer and more accurate term "pluralist".

But then he decided that Bob Ellis and John Quiggin don't deserve the right to express a leftist opinion because of Gerard's current obsession with "taxpayer funded" jobs. I happily agree with Henderson's general assessment of Ellis - as a writer largely beneath contempt and highly irrelevant. But that's the criticism to make - not that Ellis is soft on sexism so long as it is "balanced".

As for the criticism of Quiggin, it is hard to understand the relevance of a complaint about taxpayer funding of Quiggin when what was being questioned was presumably paid for by the entirely not Government funded Fairfax Media. Indeed it is a surprise that Quiggin still has that gig given how non-pluralist the AFR opinion pages have been of late.

He then finds objectionable the observation that Tony Abbott won't find much support from Australian economists - despite the fact it is true. I can tell Gerard that one economist - Frank Stilwell from the University of Sydney - does support Abbott's direct action plan. That is based on his paper Environmental Policy: Beyond the Market presented to last year's Contesting Markets Symposium. But this provides the delicious irony that Abbott's only support comes from the anti-market Left.

It is a pity to see the only Australian conservative who seemed to have a grasp on informed discussion getting so distracted.

Part 2 of Kim Chandler McDonald's (KimmiC's) interview with Vint Cerf has been published.

In it he mostly traverses three topics, net neitrality, transparency of NBN costs, and e=health.

On the net neutrality issue he makes an assertion that the NBN in Australia should restrict the net neutrality concerns. As I discussed in my ACS-TSA policy gap forum piece on interconnection, the market power issue doesn't go away simply by virtue of the separated access network. It is changed, it becomes more manageable - but it is not eliminated.

Despite the Convergence Review getting the importance of any-to-any connectivity, their Emerging Issues Paper the issue is only dealt with under the rubric of "exclusive content" as opposed to "differential connectivity".

The e-health discussion simply reveals again how vexed is the question of health. Ultimately the glimmer of hope might come from the realisation that the best standards are built by user communities and the best applications come from end-to-end rather than mediated models.

Finally, the bit that made a bit of a headline, was Cerf calling for clarity in NBN cost data. The logic seemed to be that in the theory of "competing nations" we wouldn't want other countries to actually realise how cost effective an FTTP network by Government is.

The facts are that the Government and NBn co can keep some expectations secret, but their real costs will eventually be on the public record.

I for one think our NBn risk is about failure to get the downstream market working properly than failure to get the NBN built - they are NGN risks, not NBN ones.

Had the pleasure to listen to John Quiggin at yesterday's Australian Economics Society seminar on "What have we learned from the Global Financial Crisis?"

By we he meant the economics profession and policy makers.

The core of the talk was basically a quick - and very good - summary of his book Zombie Economics The thesis is that there is a group of economic ideas that emerged from the failure of Keynesian economics to deal with the crisis of the 1970s (oil shock stagflation) that refuse to die. Instead, despite evidence that should kill them once and for all, they continue to roam the planet like zombies.

He collectively refers to the set of ideas as "market liberalism". There are five core ideas that he dissects;

1. The idea that the period starting with the 1980s was a "great moderation" that would see the end of the business cycle.
2. The efficient market hypothesis, that you can't use historical data to predict asset price moves because the price already includes all the available information. That is financial markets are the best possible guide to the value of assets.
3. Dynamic Stochastic General Equilibrium modeling and the inherent assumption that the economy never deviates far from equilibrium.
4. Trickle down economics and the idea that a focus on efficiency will guarantee that everyone is ultimately better off, even if equity diverges.
5. Privatisation and the belief that all economic activity is better performed in the private sector - even natural monopolies.

After he explained all of these theories, why they should be dead and how they are still emerging, in his talk he went on to cover a few bits about the economic profession that didn't make the book - and that I'm not going to do justice to here. The first was that we need to factor more of the learning of behavioural economics into microeconomic theory - less homo econimus in the theory. The second was a twin recognition of the problem of assuming markets at or near equilibrium and of the need for policy to focus on risk management.

Both the book and the lecture concluded with three statements of what is needed in economics;
1. More on realism, less on rigor
2. More on equity, less on efficiency
3. More on humility, less on hubris

The ultimate question here is whether we are just seeing the need for a few "tweaks" in neo-classical economics or the need for a fundamental revolution.

This raises the question of exactly what is "neo-classical" economics?

At heart Quiggin is really endorsing not just the need to walk away from market liberalism as a philosophy, but to revise these axioms.

I take a wide view that behavioural economics, institutional economics and complexity economics are all manifestations of a "realist" economics that confronts axioms 1 and 3 with the reality that the "preferences" that determine agent choices are socially constructed by the interaction with other agents - particularly so with network effects - and that as a consequence the "system" is not only never at equilibrium but is more likely than not to have multiple not singular equilibria.

The neo-classicists themselves will point to all the ways that they might piecewise incorporate elements of a widely defined institutionalism, an excellent article by Philip Mirowski showed how this attempt ultimately fails.

That article ended with a nice piece that reads;

To attempt to portray all history as the end result of purposive constrained maximization is to make the same error as was made by early biologists who touted Darwinian evolution proved that man was the peak of the evolutionary process. Biologists now teach that there is never a peak or a maximum in evolution, which is merely a process of incomplete adaptation to circumstances that are shifting, partly as a result of past adaptations. As Victor Goldberg has wrtitten in the context of his study of contracts, "the results stemming from the establishment of new institutions or modifications in existing ones are seldom known precisely and are often widely divergent from the original expectations."

As I noted Quiggin's "we" was both academics and policy makers. The challenge of convincing academics is hard enough, but at least they should understand the theory. The problem with policy makers is that they have started to incant market theory and competition policy without any understanding.

I think I have covered it is some of the concepts I outlined in my first submission to the Convergence Review wherein I argued for a better view of "competition policy".

I think the simplest way to describe it is that Quiggin critiques Trickle Down theory, which argued that a focus on efficiency improves life for all. The way "efficiency" is now used it has become the policy objective itself. Market Liberalism as a theory said you don't need to worry about equity because efficiency improves everyone's lot, modern policy theory doesn't even get that far.